Bigger Turbines, Better Economics, More Digitization on Deck for the 2018 Wind Power Market

As we enter 2018, here’s a high-level overview of which wind energy trends to keep your eye on in the coming year.

Wind turbines in the clouds. Credit: Pixabay.

By almost all estimates, 2018 should mark continued steady rise of onshore wind in mature markets coupled with a strong progression in emerging markets as wind energy cements its position as a mainstream energy technology.

After passing a major milestone in June 2017, of 500 GW of wind capacity installed, the most recent Global Wind Energy Council’s (GWEC) Outlook provides a bright forecast for wind, with its Moderate Scenario pitching global new installations reaching almost 80 GW/year and a total installed capacity of 797 GW by 2020 up from around 60 GW/year in 2017 (see Fig. 1).

With $112.5 billion invested through 2016, the sector, which employs over 1.2 million people, stands out as one of the fastest growing industrial segments in the world, and “a major driver” in the global energy transition, according to Steve Sawyer, secretary general of the GWEC.

The industry continues to see innovation across a range of metrics. A staple example: turbine capacity continues to increase — in Europe, more than 90 percent of new onshore turbines that were ordered through the first half of 2017 were larger than 3-MW. That most major OEMs will begin installation of 4-MW machines through 2018 indicates this trend will persist.

Recent industry focus on low-wind generation is coming to fruition too, opening wind power up to previously untapped markets in new places.

These developments are contributing to the increasing competitiveness of wind against other forms of generation, new and conventional alike. A 2016 report from the investment firm Lazard estimates the levelized cost of unsubsidized wind electricity in the U.S. at $32-$62 per MWh. Meanwhile, Bloomberg New Energy Finance’s New Energy Outlook 2017 predicts the levelized cost of onshore wind will nearly halve by 2040.

Against this context, Sawyer describes two important tipping points in the transition to renewables. The first, he says, we’re already in the midst of: “In many places onshore wind is the cheapest way to bring new capacity onto the grid — the major competition is solar PV, so that’s what we like to see.”

“The second is when wind, and solar, become competitive with incumbent, existing generation. At that point, the case for shutting down old plants from an economic perspective becomes compelling. Particularly in OECD markets, I think we’re going to see this playing out more strongly in the near future.”

That said, Sawyer acknowledges downward price pressure is nevertheless bringing fresh challenges for the industry: “The wind industry has two conflicting mandates: one to deliver the largest number of carbon-free electrons at the lowest price, the other to create local jobs and investment. The two don’t always match up. It’s a conflict found in many markets,” he said.

“I don’t think downward price pressure is going away anytime soon — it’s a big issue for OEMs. I expect to see more consolidation, more people pushing to grab marketshare at the expense of profits — which isn’t good for the industry in the long term. Still, while the competition will be fierce, the most recent wind industry outlooks from the IEA indicate wind will emerge as the dominant source of all power generation by 2040.”

Beyond the turbine, the increasing application of novel digital and IoT analytics that optimize O&M are providing yet more space for improved business cases to emerge from.

As the wind sector matures, it does so in the context of a rapidly evolving energy ecosystem. With this change comes opportunities. Last year, for instance, saw the arrival of several battery storage systems co-located with both onshore and offshore wind farms. This new model opens up new revenue streams for operators — an important development for an industry being pushed to operate at lower margins. With more colocation projects in the pipeline for 2018, one can expect intriguing discussions on whether pairing wind energy and battery storage will become a new norm.

Going forward, wind is expected to expand in the established markets of China, Europe, and North America. However, emerging markets, in particular in Latin America, are expected to attract investment (see Fig. 2). You can read individual market outlook pieces, which Renewable Energy World published in December, by clicking on the links provided.

Sawyer sums up his thoughts about 2018 and beyond nicely: By all accounts, wind power is going to play an increasingly dominant role in the energy systems of the future. There will inevitably be bumps along the way, but the technology has matured to the point where it is very competitive and reliable. And we’re not done improving the technology yet, not by a long shot.”